Thursday, November 29, 2012

Will It Hold Wednesday.

The day was according to the plan. All the asset classes are moving in tandem and appear to be in line with the expectation. A quick review of various assets classes are as follows:

Equities: We are coming closer to the cycle top and while my upside target in SPX is 1425, we came pretty close intra-day at 1420. Will that be considered as target met? I have started scaling in short positions with inverse ETFs for indices and will add some more tomorrow. Again, the basic premise here is “Patience” and “Agility”. The correction may or may not start tomorrow. But this was a counter trend bounce which we called well in advance and had a bounce target. Now that we are close to that target, both in terms of price and time, it seems that short trades are high probability trade. The coming down move most likely will make a lower low than what we had on November 16, enough to create doubt and fear in the minds of the retail investors. That is when the Boyz will buy cheap and pump the prices up again. As you have seen in yesterdays Dilbert cartoon, someone will create Media frenzy, Banksters will pump or dump the prices and Sheeples will be sheared off.

I am sure that when I will call you guys to go long next month, many of you will hesitate and wait for everything to be OK. And when everything will seem OK, it will be time to sell again. To win this con game, we have to go where the puck is going to be, not where the puck is.

Precious Metals: Silver had a moment of madness and spiked higher but gold was not able to cover the loss of yesterday. I did take a small short position in silver with ZSL with a very tight stop. If Silver closes above $ 35 next week, I will close this trade but for now I expect silver to correct along with equities. How much it will go down I am not sure. The 1st target is a close below $33 and then I will add some more short positions. So right now, there is a range for this trade and I would be monitoring this range for further action. I am not touching gold for now and will wait for all risk assets to bottom before going long again.

Crude: Crude made a possible double top around $ 88.50 and did not held on to the gain. Like equities, here also the short term cycle has topped or about to top and I do expect further correction in Crude prices. I am short crude with SCO and will add some more tomorrow. Once it closes below $ 86, we can be very sure of the coming correction and the minimum downside price target would be around $75-$77. Let’s wait and see how it plays out. I think this one is a high probability trade.

Coffee: While coffee seems to have made a bottom, the hourly chart is overbought and we might see some pull back shortly. It is where that pullback ends will give credence to the bottoming of coffee. There is no hurry. From a high of $308.9, coffee had corrected to $ 144 which is more than 50%. So we have lots to cover on the upside and we can afford to wait for a while for confirmation. I just want to draw your attention to this potential winner.

Nat. Gas: Most likely it gave a short term sell signal but I do not think it is going to be anything serious. The biggest oil company in the world, Exxon Mobil is getting in Nat. Gas in a big way and when such a giant starts taking a position, we know the future. I would be looking to add Nat. Gas as a long term play in future.

Bonds: For many months now Bonds are moving in a range. TLT made a high in last July and since then it is just chopping around. As there is no clear direction, I have not touched it. But the long term trend is clear. If you are long bond, it would be better to book profit. The interest rates will start going up starting sometime in the next 3-4 months. TBT will be the trade of the life time then. But we will have to wait for that trade as the time is not yet ripe for taking any position in Bond. The inverse relationship between Bond and Equity is about to get discarded.

That’s all for tonight. Thank you for sharing my thoughts. Hope you are able to pass on the blog to your friends and join me in twitter (@BBFinanceblog). As I said yesterday, come January, we will have a paid subscription service to selected few with specific trade ideas. I will be emailing at least once a week high probability trades with entry, stop loss and exit points. If you have been reading this blog for a while, you know that I will try to minimize risk and look for high probability trades. Of course it will be a paid service and I am looking only a selected few. So if you are a serious investor, with investment of minimum $100 K or more, looking to earn decent return on your portfolio consistently without speculation or undue risk, do send an email to: bbfinanceblog@gmail.com to be included in the mailing list.